On Appeal from the United States District Court for the Eastern District of Pennsylvania. MDL No. 1203. District Court Judge: The Honorable Harvey Bartle, III.
Before: Nygaard, Ambro and Garth, Circuit Judges
The opinion of the court was delivered by: Garth, Circuit Judge
Argued on October 27, 2004
These seven appeals have been filed by counsel to various claimants in the Diet Drugs Product Liability Multidistrict Litigation ("MDL 1203"), charging essentially that the District Court abused its discretion in awarding and allocating an interim award of attorneys' fees. In the alternative, several of the complaining attorneys petition this Court to issue a writ of mandamus reversing the award. Because we conclude that the orders from which the appeals were taken, Pretrial Order Nos. 2622 & 2859, are not final and appealable orders, we will dismiss each of these appeals for want of appellate jurisdiction. We will also deny the Petition because the circumstances do not warrant relief by way of mandamus.
In November 1999, American Home Products Corporation ("AHP"), which had sold two prescription drugs*fn2 for the treatment of obesity, fenfluramine and dexfenfluramine, marketed as "Pondimin" and "Redux,"entered into a Nationwide Class Action Settlement Agreement (the "Settlement Agreement") with a coalition of plaintiffs' attorneys. These attorneys represented those individuals, in both MDL 1203 and the coordinated state class actions, who had sought monetary damages and other relief from their purchase and ingestion of the diet drugs.
Comprehensive in its description of the various classes or categories of claimants which it comprised, the Settlement Agreement also made provision for the payment of legal fees. In particular, the Settlement Agreement established two accounts (to be funded by Wyeth) - the Fund A Legal Fee Escrow Account and the Fund B Legal Fee Escrow Account - to provide for an appropriate award of attorneys' fees. Additionally, the District Court ordered a percentage of fees from settlements or other recoveries achieved by opt-out plaintiffs in individual actions to be paid into a separate account - the MDL 1203 Fee & Cost Account - to compensate the Plaintiffs' Management Committee (the "PMC") for its common benefit work in MDL 1203. The District Court's interim award of attorneys' fees ($153,722,911.25) was comprised of funds from all three accounts.*fn3
The overarching question presented by four of the seven current appeals is whether the District Court properly*fn4 sequestered a percentage of funds from individual settlements or recoveries to compensate the PMC in cases where individual plaintiffs and their attorneys did not utilize the PMC's discovery or trial preparation materials and thus received no ostensible benefit from the PMC. These four appeals, consequently, focus only on that portion of the interim fee award drawn from the MDL 1203 Fee & Cost Account. The three remaining appeals*fn5 raise the question of whether the District Court fairly allocated the interim fee award among the PMC, Class Counsel and other common benefit attorneys claiming entitlement to share in the award.
A threshold issue here, however, is that of our appellate jurisdiction, for absent jurisdiction we cannot decide the many issues raised before us. See Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 379 (1981). We are confronted with appeals from an award of attorneys' fees, which, by their interim nature, may lack the necessary elements of finality to properly invoke this Court's appellate jurisdiction. At the outset, therefore, but not before we describe the nature of the interim fee award within the broader context of this litigation, we turn to the resolution of our jurisdiction.
Some of the details of this complex case can be found in the opinions from this Court dealing with issues concerning the Settlement Agreement and its Amendments. However, other*fn6 facts less relevant to the prior appeals, or cursorily mentioned in prior opinions, assume greater salience here, thus warranting renewed and extended discussion. The relevant, although abbreviated, aspects of this factual history are reproduced here and taken largely from the District Court's descriptions in its three pretrial orders. See Pretrial Order Nos. 1415, 2622 and 2859.
Between 1995 and 1997, four million people took Pondimin and two million people took Redux. In September 1997, the U.S. Food and Drug Administration ("FDA") issued a press release reporting abnormal echocardiograms in a "higher than expected percentage of" patients taking the drugs. See Press Release, FDA, FDA Announces Withdrawal of Fenfluramine and Dexfenfluramine (Fen-Phen) (Sept. 15, 1997). Subsequent studies suggested that the drugs may have been linked to serious cardiopulmonary side effects, including heartvalve regurgitation (the reverse flow of blood through a closed valve of the heart) and primary pulmonary hypertension (a progressive and fatal disease affecting pulmonary circulation).
After the withdrawal of the diet drugs, 18,000 individual suits and 130 class actions were filed in state and federal courts. In December 1997, the federal cases were transferred to the Eastern District of Pennsylvania for consolidated or coordinated pretrial purposes by the Judicial Panel on Multidistrict Litigation pursuant to 28 U.S.C. § 1407. In November 1999, Wyeth entered into the Settlement Agreement with users of the diet drugs in the United States. After conducting fairness proceedings, the District Court in the Eastern District of Pennsylvania certified a settlement class and approved the Settlement Agreement. See Pretrial Order No. 1415. Appeals of Pretrial Order No. 1415 followed, with Final Judicial Approval, as defined in the Settlement Agreement, occurring in January 2002.
About 50,000 diet drug recipients ultimately exercised their "initial opt-out rights" to resolve their claims independent of the terms of the class settlement. Soon thereafter, Wyeth settled the claims of all but 600 of these "initial opt-outs," including nearly all of the claims that had been pending in the MDL 1203 proceedings as of November 1999.
Two categories of benefits were and are available to all Class Members under the Settlement Agreement. First, Class Members may apply for medical monitoring and refund benefits. These benefits differ depending upon the length of time that a Class Member ingested diet drugs. Second, Class Members who have serious valvular heart disease ("VHD") may apply for "matrix benefits." The value of matrix benefits for Class Members ranges from $7,389 to $1,485,000. Under the Settlement Agreement, a particular Class Member's benefit is calculated based on his or her age at the time of diagnosis of a matrix-level condition and the severity of the condition. Recognizing the progressive nature of VHD, the Settlement Agreement also allows for damage payments to Class Members who develop serious levels of VHD at any time up to December 31, 2015.
Two separate funds were established under the Settlement Agreement to provide the above benefits to Class Members, and the AHP Settlement Trust was created to administer them. Fund A provided compensation for all nonmatrix benefits and associated costs available under the Settlement Agreement. Wyeth fully funded Fund A with $1 billion.
Fund B is the continuing source of matrix benefits and associated costs. Wyeth pays into Fund B on an ongoing basis. Ultimately, Wyeth is obligated for a total of $2.55 billion plus accretion in Fund B benefits, minus certain credits to which it is entitled under the Settlement Agreement. We learned at oral argument that the Trustees have determined that all Fund A purposes have been satisfied, resulting in the transfer of the remaining balance of Fund A to Fund B.*fn7
The counsel fees at issue here, totaling $153,722,911.25, were drawn from three separate accounts: the Fund A Legal Fee Escrow Account, the Fund B Legal Fee Escrow Account, and the MDL 1203 Fee & Cost Account. See note 2 supra. We describe each of these accounts below.
1. Funds A & B Legal Fee Escrow Accounts (the "settlement funds")
With respect to the monitoring and refund benefits afforded by Fund A, the Settlement Agreement required that Wyeth deposit the sum of $200 million in the Fund A Legal Fee Escrow Account to pay for the services of counsel in creating that fund. To the extent that any balance remains in the escrow account after payment of fees awarded by the court, that balance will be returned to Wyeth. See Settlement Agreement at § III.B.3.
Attorneys' fees associated with Fund B (matrix claims) are paid out of the Fund B Legal Fee Escrow Account. Class Counsel have agreed that the amount of such fees shall not exceed $229 million, which is 9% of the $2.55 billion present value amount of Fund B. As such, 9% of every matrix compensation benefit awarded to a Class Member is set aside in the Fund B Legal Fee Escrow Account. In the event a Class Member is represented by counsel, the 9% assessment is deducted from the individual attorney's fee.
This cap on the award of common benefit fees in relation to Fund B is consistent with a prior determination by the District Court that it was appropriate to set aside 9% of the amount recovered by plaintiffs in MDL 1203 and coordinated state litigation to pay "common benefit fees." See Pretrial Order Nos. 467 & 517. If the court awards less than the 9% assessments in the Fund B Legal Fee Escrow Account, the monies not awarded will be returned to the Class Members or individual attorneys representing Class Members who contributed the 9% set aside. See Settlement Agreement at § VIII.E.1.c.
2. MDL 1203 Fee & Cost Account
Pretrial Order No. 467 established the MDL 1203 Fee & Cost Account. This order provided for the sequestration of 9% of all payments made by the defendant in settlements in any case transferred to MDL 1203, to be paid into the MDL 1203 Fee & Cost Account out of individual attorneys' share of recoveries. See Pretrial Order No. 467. The funds so sequestered were and are available to provide reimbursement of costs and payment of attorneys' fees to the PMC and other attorneys who had been authorized by the PMC, pursuant to Pretrial Order No. 16, to*fn8 perform work for the common benefit of plaintiffs in MDL 1203 and in any coordinated state-court proceedings. Ultimately, 3,000 federal cases were subject to the 9% set-aside required by Pretrial Order No. 467.
That order, which was extended by Pretrial Order No. 517, was also designed to facilitate state-federal coordination in the diet drugs litigation. Pursuant to those orders, any state action became eligible for state-federal coordination in the event a court with jurisdiction over the state court action entered an order requiring, among other things, the sequestration of a 6% assessment for the MDL 1203 Fee & Cost Account. Moreover, in exchange for access to the PMC's work product and "trial package," nearly 100 separate state attorneys signed coordination agreements, voluntarily stipulating to the 6% set-aside in all of their state cases.
The mere sequestration of the 9% and 6% of settlement or satisfaction proceeds did not guarantee that the PMC would receive the full amount. To the contrary, the District Court stated that only "upon a proper showing" would the common benefit attorneys receive an award of counsel fees and expenses from the MDL 1203 Fee & Cost Account, in such amounts determined by the court in accordance with controlling law. See Pretrial Order No. 467 at ¶ 7.*fn9
All counsel who anticipated filing an application for the award of counsel fees and costs were required to submit their time and expense records for examination by a certified public accountant appointed by the District Court to "audit" these records. See Pretrial Order Nos. 16, 1164 & 2224. The audit procedure was designed to segregate potential fee applicants into one of two modes for presentation of their fee requests to the court - either through a "Joint Petition" or through "individual petitions." See Pretrial Order Nos. 2023 & 2224.*fn10 Through this process, 106 different law firms submitted applications for fees and expenses for the auditor's review.
All of the Joint Petitioners sought to participate in the award of fees and costs from the proceeds of the Settlement Agreement with Wyeth ( i.e., the settlement funds). The 27 firms within the PMC constituency also sought recovery of fees and cost-reimbursements from the MDL 1203 Fee & Cost Account for services provided to the District Court, the federal litigants, and the plaintiffs in the coordinated state litigation during the course of the MDL proceedings.
In Pretrial Order No. 2622, the District Court considered the petitions for counsel fees and costs in connection with the multidistrict litigation and class action settlement. With respect to the settlement funds, the District Court determined that it was "premature to perform a definitive percentage of recovery analysis." It stated:
In the usual situation the fee is sought at or near the conclusion of litigation where the only other function remaining is to pay out the court-approved settlement dollars to the class members. The court is then in a good position to review the settlement in light of the Gunter factors. In this class action, in contrast, the settlement is still in many respects in its early stages.
Many issues regarding interpretation of the Settlement Agreement, the operation and funding of the Trust, and the payment of benefits to Class Members remain to be resolved. The court is still faced with a continual flow of contested motions and hearings on a variety of matters which could affect the value and efficacy of the settlement.
Pretrial Order No. 2622 at 21-22. For these reasons, the*fn11 District Court determined that it could not make a final fee award from the settlement funds:
Questions regarding the value of the settlement and the benefits conferred on Class Members clearly remain. See Gunter, 223 F.3d at 195 n.1. Under the circumstances, the court finds that it is not possible to undertake a Gunter analysis and make a full fee award from the Fund B Legal Fee Escrow Account at this time.... In addition, the Trust has followed with an emergency motion seeking the suspension of certain Fund A processing deadlines... Again, with this issue pending, it would be premature to make a final award of counsel fees from the Fund A Legal Fee Escrow Account.
Nonetheless, given the "herculean effort" of the Joint Petitioners with respect to the class settlement, the District Court found that it would be both fair and reasonable to make an "interim fee award" in the amount of $80 million, consisting of $40 million from the Fund A Legal Fee Escrow Account and $40 million from the Fund B Legal Fee Escrow Account. A larger award, the District Court noted, would be "inequitable when so many Class Members are experiencing prolonged delays in the receipt of their benefits." A final award would have to wait until the viability of the Settlement Agreement had been firmly established. The District Court stated:
When the pressing issues delineated above have been resolved and the entire picture is less clouded, Joint Petitioners and others ruled herein to be entitled to a fee may make further application for additional compensation but no earlier than October 1, 2003. We hope by that point the court will be in a better position to make a final fee award to Class Counsel, after consideration and application of Gunter.
The District Court next addressed the claims of the individual petitioners, who essentially asserted that the work they performed in the Diet Drugs litigation conferred a benefit on the class, thus entitling them to an award from the settlement funds. After reviewing their submissions, with two exceptions, the District Court determined that the individual petitioners were not entitled to any fees.
With respect to the available funds in the MDL 1203 Fee & Cost Account, the District Court awarded attorneys' fees in the aggregate amount of $80 million (approximately 5.13% of the gross recovery in federal cases and 3.42% of the gross recovery in the coordinated state litigation), subject to an appropriate proceeding as to the allocation of that award among the 27 firms eligible to participate therein. The remaining*fn12 one-third of the 6% and 9% assessments, approximately $47 million, was returned without interest to those attorneys who had deposited the funds into the MDL 1203 Fee & Cost Account. Finally, the District Court directed that $2.5 million remain on reserve in the MDL 1203 Fee & Cost Account as a source for payment of ongoing expenses associated with the administration of MDL 1203. As such, Pretrial Order No. 2622 virtually exhausted the funds contained in the MDL 1203 Fee & Cost Account.*fn13
The Joint Petition further suggested that the District Court charge Arnold Levin, Esq. and Michael Fishbein, Esq. of the firm Levin, Fishbein, et al , which was a member of the PMC and lead counsel in the class action, with the task of coordinating and developing an agreed upon allocation. The District Court agreed with the suggestion, with some modification, finding the request consistent with authority for allowing lead counsel to allocate fees. The District Court thus appointed the FCAC, consisting of five of the Joint Petitioners, to make a first attempt at allocating the interim class fee award and the award from the MDL 1203 Fee & Cost Account. The District Court also provided for objections, responses and hearings regarding the recommended allocation plan.
On May 15, 2003, the District Court affirmed, with slight modification, the FCAC's fee allocation plan in Pretrial Order 2859, thereby authorizing the distribution of the interim fee amounts. Directly after the District Court entered its Pretrial Order No. 2859, certain of the appealing attorneys sought an*fn14 emergency stay pending appeal, which was granted by this Court. Thereafter, the PMC and Class Counsel moved to*fn15 *fn16 dismiss the appeals for lack of appellate jurisdiction. Our*fn17 review is plenary.
We must briefly address a preliminary issue raised by the Hague appeal before proceeding to consider the threshold*fn18 issue of jurisdiction, which affects all seven appeals.
Attorney Brian S. Riepen represented several diet drug users in state and federal courts. His federal cases, upon being transferred to the Eastern District of Pennsylvania for coordinated or consolidated pretrial proceedings under MDL 1203, were subject to the 9% assessment for the MDL 1203 Fee & Cost Account. Because Riepen allegedly failed to use or benefit from the PMC's discovery efforts, he objected to the MDL 1203 assessment against the individual settlements in the federal cases.
Between the time of the fee hearing and the issuance of Pretrial Order No. 2622, Riepen moved his office to a different location. Although he notified the District Court by sending a letter to the Clerk's Office, Riepen inadvertently failed to notify the PMC or Liaison Counsel about his change of address. This proved to be critical because one of the court-imposed obligations of the PMC was the service of papers and orders on participating counsel. When the PMC mailed Pretrial Order No. 2622 to participating counsel, it presumably mailed the order to Riepen's old business address.
Pretrial Order No. 2622 issued on October 3, 2002. It was entered on the District Court's docket on October 4, 2002. On Friday, November 1, 2002, Riepen's office received from the Clerk of Court a copy of a notice of appeal from Pretrial Order No. 2622 filed by another counsel participating in MDL 1203. Pursuant to Fed. R. App. P. 4(a), the deadline to file an*fn19 appeal was Monday, November 4, 2002. On Wednesday, November 6, after the deadline had passed, Riepen claims to have finally learned that Pretrial Order No. 2622 had issued on October 3 and that the appeal deadline had recently passed.
On November 12, 2002, eight days after the time to appeal had expired, Riepen filed an untimely Notice of Appeal and also moved the District Court to extend the time to appeal under Rule 4(a)(5), claiming "excusable neglect." The PMC*fn20 opposed the motion.
On February 20, 2003, this Court ordered the appeal dismissed for lack of jurisdiction. On November 26, 2003 (more than a year after Riepen's motion was filed), in Pretrial Order No. 3141, the District Court denied Riepen's motion to excuse the untimely appeal. On December 22, 2003, Riepen filed a timely Notice of Appeal from that order, which is a final order for purposes of 28 U.S.C. § 1291. Appellate jurisdiction therefore exists ...